Fiduciary Considerations in Offering a Brokerage Window (PDF)
"The first topic of this article, and its principal focus, is the fiduciary process for deciding whether to offer a brokerage window and selecting the provider of the window. The second covers the requirements under the new participant disclosure rules. Finally, [the article considers] the implications of the fiduciaries or a participant selecting an RIA to serve as an investment manager or advisor for a participant's individual brokerage window."
(Drinker Biddle via TD Ameritrade)
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[Guidance Overview]
Which Employers Qualify for Relief Under the PBGC's Section 4062(e) Enforcement Pilot Program? (PDF)
"This announcement could be viewed as reflecting a softening of PBGC's general approach to Section 4062(e) enforcement (in that it provides relief in many situations) or as a hardening of its approach (in that it allows PBGC to focus its resources intensively on other situations). And it raises a question ... as to whether the initiation of this pilot program might signal some openness on the part of PBGC to change some of the expansive 4062(e) interpretations that have attracted significant opposition from the employer community."
(Bloomberg BNA via Keightley & Ashner LLP)
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[Guidance Overview]
IRS Further Extends Deadline for Defined Benefit Plan Amendments for Section 436
"In what has become something of a ritual, the IRS is once again extending the deadline by which single-employer defined benefit plans must be amended to implement the regime of funding-based benefit restrictions imposed by the Pension Protection Act of 2006 (PPA). Notice 2012-70 ... pushes the general deadline back one more year, to the end of the 2013 plan year.... [T]his most recent postponement seems to originate in confusion generated by the IRS itself."
(Spencer Fane)
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Poll Shows Growing Financial Advisor Opposition to DOL Fiduciary Rule
"Financial Advisor opposition to the Department of Labor's fiduciary definition proposal has increased over the past year. This latest poll found that 91% oppose redefining the definition of fiduciary for financial advisors, up from 89% in August and 72% in February of this year. The redefinition would ban the earning of a commission on IRA advice, pricing millions of middle class investors out of the market on affordable advice."
(Financial Services Institute)
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Pennsylvania Governor Says State Must Reform Public Pensions or Face Budget Crisis
"The state's two public pension plans, for state employees and public school workers, have an unfunded liability of $41 billion. What's more, pension cost increases in the next few years will skyrocket, threatening to gobble most of any additional revenue coming into state coffers and leading to steep cuts and even steeper property tax increases."
(Philadelphia Inquirer)
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CalPERS Prepares to Sue Bankrupt San Bernardino Over Decision to Halt Pension Contributions
"The powerful California Public Employees' Retirement System (CalPERS) filed a legal motion declaring its intention to sue San Bernardino for millions of dollars in pension arrears, a move that the fund has never before had to make in a municipal bankruptcy.... San Bernardino's decision to halt its payments, and its move on Monday night to include in a new budget an attempt to renegotiate the terms of its debt with Calpers, is uncharted territory for the pension fund."
(Chicago Tribune; free registration required)
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ESOP of Plastic Surgeon's Management Company Disqualified for Failure to Provide Minimum Coverage to Affiliates
"If one of the reasons the IRS disqualifies the plan is its failure to satisfy the coverage or nondiscrimination requirements ..., the highly compensated employee must include in gross income... the total value of his/her vested account balance ... determined as of the close of the trust's taxable year. By contrast, in a typical plan disqualification (not involving coverage or nondiscrimination), a participant only will include in gross income contributions (to the extent vested) made during the disqualified years." [Yarish v. Commissioner, 139 T.C. 11 (2012)]
(SunGard Relius)
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DB Plans Are Getting More Contributions Than Ever
"A growing number of plan sponsors and other pension experts ... are urging companies to put more money into their pension plans than legally required, whether by allocating excess corporate cash or by issuing bonds. But the advice sometimes comes with a twist: Any new funding should be part of a strategic overhaul to reduce the investment risk."
(Institutional Investor)
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The State of State Pension Plans: A Deep Dive Into Shortfalls and Surpluses
"Despite their importance, the inner workings of pensions remain mired in foggy opacity, due to a combination of their complexity and sheer number, as well as a lack of transparency precipitated by weak disclosure requirements.... Morningstar has analyzed current data for pension plans administered by each of the 50 states. Overall ... the fiscal health of state pension plans varies drastically with some states having exceptionally strong plans while others are facing severe funding shortfalls."
(Morningstar Investment Management)
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Bond Yields May Fall Short of Corporate Pension Fund Needs
"As corporate pension plans and other investors keep piling into longer-dated corporate bonds, seeking better-than-Treasury yields to match their future liabilities, those corporate bond yields keep falling. That's setting up a longer-term problem for pension plans[.]"
(Barrons)
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Implementing a Lifetime Income Option in a DC Plan: Lessons from United Technologies Corporation
"The benefits group, treasury, investments and legal sat down over a series of meetings and came up with three simple principles that informed the entire design process: Keep it simple. Make it even lower-cost than before And keep it flexible. Not only [does the company] want people to have the opportunity to save and invest for retirement; [it wants] them to be confident that they'll have adequate income in retirement. That was a very meaningful shift in framing from the savings-and-investments framework, which is very inefficient."
(Alliance Bernstein)
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The Effect of Active vs. Passive Decisions on 'Crowdout' in Retirement Savings Accounts
"[This study finds] that a policy's impact on total savings depends critically on whether it changes savings rates by active or passive choice. Tax subsidies, which rely upon individuals to take an action to raise savings, have small impacts on total wealth ... each $1 of tax expenditure on subsidies increases total saving by 1 cent. In contrast, policies that raise savings automatically even if individuals take no action -- such as employer-provided pensions or automatic contributions to retirement accounts -- increase wealth accumulation substantially.... [A]utomatic contributions are more effective at increasing total retirement savings than price subsidies for three reasons: (1) subsidies induce relatively few individuals to respond, (2) they generate substantial crowdout conditional on response, and (3) they do not influence the savings behavior of passive individuals, who are least prepared for retirement."
(National Bureau of Economic Research)
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[Opinion]
Fiscal Cliff: Why Congress Might Have to Mess with the 401(k)
"One of the earliest fears about tax-favored savings accounts like IRAs and 401(k) plans was that when this pool of savings grew large enough Congress would not be able to resist tapping it to help solve the nation's debt problems. We're about to find out if those fears -- persistent for three decades -- have been justified."
(TIME)
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[Opinion]
Hostess Brands Is Latest Case Highlighting Funding Challenges of Multiemployer Plans
"Recent efforts by Hostess Brands Inc. to use bankruptcy to discharge withdrawal liabilities totaling nearly $2 billion highlight a persistent and serious problem for multiemployer plans ... Employers such as snack food maker Hostess have tried using bankruptcy to avoid their withdrawal obligations, to the detriment of multiemployer plan participants, their beneficiaries, and the employers that continue to contribute to those plans[.]"
(Bloomberg BNA)
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Benefits in General; Executive Compensation
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[Guidance Overview]
Coming Up This Proxy Season: Comp Committee and Adviser Independence, ISS Guidelines and Shareholder Litigation
"Public companies preparing for the upcoming 2013 proxy season will need to keep in mind a number of new developments related to executive compensation, including: New Securities and Exchange Commission rules that require 2013 proxy statement disclosure of compensation consultant conflicts of interest; Proposed NYSE and NASDAQ listing standards that will impose new requirements for future proxy seasons regarding independence of listed company compensation committee members and compensation consultants and other advisers; and New ISS and Glass Lewis proxy voting guidelines relating to compensation that will apply for the 2013 proxy season."
(Perkins Coie LLP)
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ISS 2013 Policy Updates (PDF)
"The 2013 updates to the quantitative pay-for-performance evaluation (i.e., the say-on-pay analysis) should result in greater alignment between a company's self-selected peer group and the ISS peer group so that companies do not need to run two separate CEO pay-for-performance tests. Further, the inclusion of realizable pay in the qualitative say-on-pay analysis is consistent with a growing practice by many companies to disclose realized executive compensation in order to more accurately reflect pay delivery. The pledging determination is performed on a case by case basis and the onus is now on board members as part of their risk oversight duties."
(Orrick)
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2013 Standard Mileage Rates: IRS Taps the Gas Pedal Lightly
"With gas prices flat, the IRS has announced a 1-cent increase in standard mileage rates for the business use of a vehicle. Thus, that rate will be 56.5 cents per mile for business miles driven in 2013, up from 55.5 cents a miles this year. There also will be a 1-cent increase in the standard rate per mile driven for medical or moving purposes, to 24 cents, while the rate for miles driven for charitable purposes remains at 14 cents."
(Financial Planning)
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2013 Expiring and Changing Employee Benefit and Payroll Provisions
"The income tax exclusion for amounts paid by an employer under a qualified adoption assistance program is ... set to expire on December 31, 2012.... Employee contributions to health care flexible spending accounts will be reduced to $2,500 per year for plan years beginning in 2013.... Certain reimbursements for employer-provided educational assistance will expire at the end of 2012."
(McDermott Will & Emery)
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Benefits Expansion for Federal Employees' Domestic Partners Would Have Small Impact on Costs, CBO Says
"Currently, [same-gender] partners are eligible under some federal employee family benefits, such as counseling programs and certain travel and relocation payments. They also are eligible for the Federal Long Term Care Insurance Program ... and for a less generous form of a survivor benefit ... However, legislation would be required to make those partners eligible for two of the most valuable benefits, Federal Employees Health Benefits Program coverage and standard retirement survivor annuities. 'CBO expects that few federal employees (less than 1 percent) would choose to register a same-gender domestic partnership if given the opportunity,' [the report] said."
(The Washington Post; free registration required)
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Press Releases
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